Company Quick10K Filing
Quick10K
Lakeland Financial
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$45.03 25 $1,130
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
8-K 2019-01-25 Earnings, Other Events, Exhibits
8-K 2019-01-25 Earnings, Other Events, Exhibits
8-K 2019-01-08 Regulation FD
8-K 2018-11-27 Officers
8-K 2018-10-25 Earnings, Exhibits
8-K 2018-10-11 Officers, Regulation FD, Exhibits
8-K 2018-10-09 Regulation FD
8-K 2018-07-25 Earnings, Exhibits
8-K 2018-07-10 Regulation FD
8-K 2018-04-25 Earnings, Exhibits
8-K 2018-04-10 Regulation FD, Exhibits
8-K 2018-01-25 Earnings, Exhibits
8-K 2018-01-11 Regulation FD
8-K 2018-01-09 Regulation FD
CFG Citizens Financial Group
ZION Zions Bancorporation
FCNCA First Citizens Bancshares
CHCO City Holding
LBC Luther Burbank
THFF First Financial
ACNB ACNB
NWFL Norwood Financial
EVBN Evans Bancorp
RNDB Randolph Bancorp
LKFN 2018-09-30
Item 1. Financial Statements
Note 1. Basis of Presentation
Note 2. Securities
Note 3. Loans
Note 4. Allowance for Loan Losses and Credit Quality
Note 5. Fair Value Disclosures
Note 6. Securities Sold Under Agreements To Repurchase
Note 7. Employee Benefit Plans
Note 8. Offsetting Assets and Liabilities
Note 9. Earnings per Share
Note 10. Accumulated Other Comprehensive Income (Loss)
Note 11. Revenue Recognition
Item 2 ‑ Management's Discussion and Analysis of Financial Condition and Results Of
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
Item 4 - Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ex311.htm
EX-31.2 ex312.htm
EX-32.1 ex321.htm
EX-32.2 ex322.htm

Lakeland Financial Earnings 2018-09-30

LKFN 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 lkfn10q.htm FORM 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10‑Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018

OR

[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _____________

LAKELAND FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)

Indiana
0-11487
35-1559596
(State or Other Jurisdiction
(Commission File Number)
(IRS Employer
of Incorporation or Organization)
 
Identification No.)


202 East Center Street, P.O. Box 1387, Warsaw, Indiana 46581‑1387
(Address of Principal Executive Offices)(Zip Code)

(574) 267‑6144
(Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]   No [  ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of ''large accelerated filer,'' ''accelerated filer,'' ''smaller reporting company,'' and ''emerging growth company'' in Rule 12b–2 of the Exchange Act.

Large accelerated filer [X]   Accelerated filer [  ]   Non-accelerated filer [  ]
Smaller reporting company [  ]    Emerging growth company [  ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

Number of shares of common stock outstanding at October 31, 2018:  25,301,732



TABLE OF CONTENTS
   
Page
     
PART I. FINANCIAL INFORMATION
 
   
     
Item 1.
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
     
PART II. OTHER INFORMATION
 
     
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
     
     




ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS (in thousands except share data)
 
September 30,
 
December 31,
 
2018
 
2017
 
(Unaudited)
 
 
ASSETS
 
 
 
Cash and due from banks
 $151,127
 
 $140,402
Short-term investments
31,193
 
35,778
  Total cash and cash equivalents
182,320
 
176,180
 
 
 
 
Securities available for sale (carried at fair value)
570,568
 
538,493
Real estate mortgage loans held for sale
3,488
 
3,346
 
 
 
 
Loans, net of allowance for loan losses of $48,343 and $47,121
3,794,782
 
3,771,338
 
 
 
 
Land, premises and equipment, net
57,644
 
56,466
Bank owned life insurance
76,998
 
75,879
Federal Reserve and Federal Home Loan Bank stock
13,772
 
13,772
Accrued interest receivable
15,802
 
14,093
Goodwill
4,970
 
4,970
Other assets
37,275
 
28,439
  Total assets
 $4,757,619
 
 $4,682,976
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
LIABILITIES
 
 
 
Noninterest bearing deposits
 $880,363
 
 $885,622
Interest bearing deposits
3,135,561
 
3,123,033
  Total deposits
4,015,924
 
4,008,655
 
 
 
 
Borrowings
 
 
 
  Federal funds purchased
20,000
 
0
  Securities sold under agreements to repurchase
77,352
 
70,652
  Federal Home Loan Bank advances
80,000
 
80,030
  Subordinated debentures
30,928
 
30,928
    Total borrowings
208,280
 
181,610
 
 
 
 
Accrued interest payable
8,742
 
6,311
Other liabilities
26,132
 
17,733
    Total liabilities
4,259,078
 
4,214,309
 
 
 
 
STOCKHOLDERS' EQUITY
 
 
 
Common stock:  90,000,000 shares authorized, no par value
 
 
 
 25,301,732 shares issued and 25,129,796 outstanding as of September 30, 2018
 
 
 
 25,194,903 shares issued and 25,025,933 outstanding as of December 31, 2017
111,045
 
108,862
Retained earnings
404,394
 
363,794
Accumulated other comprehensive income/(loss)
(13,276)
 
(670)
Treasury stock, at cost (2018 - 171,936 shares, 2017 - 168,970 shares)
(3,711)
 
(3,408)
  Total stockholders' equity
498,452
 
468,578
  Noncontrolling interest
89
 
89
  Total equity
498,541
 
468,667
    Total liabilities and equity
 $4,757,619
 
 $4,682,976
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
 
1


 
CONSOLIDATED STATEMENTS OF INCOME (unaudited - in thousands except share and per share data)
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2018
 
2017
 
2018
 
2017
NET INTEREST INCOME
 
 
 
 
 
 
 
Interest and fees on loans
 
 
 
 
 
 
 
  Taxable
 $46,127
 
 $38,630
 
 $132,360
 
 $110,044
  Tax exempt
 208
 
 205
 
 627
 
 517
Interest and dividends on securities
 
 
 
 
 
 
 
  Taxable
 2,275
 
 2,349
 
 7,201
 
 7,033
  Tax exempt
 1,570
 
 1,309
 
 4,367
 
 3,745
Other interest income
 199
 
 96
 
 687
 
 198
    Total interest income
 50,379
 
 42,589
 
 145,242
 
 121,537
 
 
 
 
 
 
 
 
Interest on deposits
 11,473
 
 7,037
 
 31,488
 
 18,722
Interest on borrowings
 
 
 
 
 
 
 
  Short-term
 555
 
 588
 
 861
 
 1,329
  Long-term
 426
 
 344
 
 1,212
 
 986
    Total interest expense
 12,454
 
 7,969
 
 33,561
 
 21,037
 
 
 
 
 
 
 
 
NET INTEREST INCOME
 37,925
 
 34,620
 
 111,681
 
 100,500
 
 
 
 
 
 
 
 
Provision for loan losses
 1,100
 
 450
 
 6,100
 
 1,150
 
 
 
 
 
 
 
 
NET INTEREST INCOME AFTER PROVISION FOR
 
 
 
 
 
 
 
  LOAN LOSSES
 36,825
 
 34,170
 
 105,581
 
 99,350
 
 
 
 
 
 
 
 
NONINTEREST INCOME
 
 
 
 
 
 
 
Wealth advisory fees
 1,627
 
 1,471
 
 4,676
 
 4,005
Investment brokerage fees
 376
 
 330
 
 1,043
 
 950
Service charges on deposit accounts
 4,114
 
 3,631
 
 11,542
 
 10,027
Loan and service fees
 2,327
 
 2,060
 
 6,925
 
 5,850
Merchant card fee income
 643
 
 588
 
 1,834
 
 1,696
Bank owned life insurance income
 466
 
 397
 
 1,177
 
 1,270
Other income
 561
 
 718
 
 1,816
 
 1,886
Mortgage banking income
 319
 
 302
 
 998
 
 811
Net securities gains/(losses)
 0
 
 0
 
 (6)
 
 52
  Total noninterest income
 10,433
 
 9,497
 
 30,005
 
 26,547
 
 
 
 
 
 
 
 
NONINTEREST EXPENSE
 
 
 
 
 
 
 
Salaries and employee benefits
 12,755
 
 11,678
 
 36,267
 
 34,062
Net occupancy expense
 1,229
 
 1,131
 
 3,892
 
 3,405
Equipment costs
 1,316
 
 1,182
 
 3,840
 
 3,413
Data processing fees and supplies
 2,489
 
 2,032
 
 7,292
 
 6,022
Corporate and business development
 891
 
 1,245
 
 3,070
 
 3,943
FDIC insurance and other regulatory fees
 412
 
 443
 
 1,282
 
 1,296
Professional fees
 934
 
 962
 
 2,716
 
 2,717
Other expense
 1,983
 
 1,596
 
 5,126
 
 4,811
  Total noninterest expense
 22,009
 
 20,269
 
 63,485
 
 59,669
 
 
 
 
 
 
 
 
INCOME BEFORE INCOME TAX EXPENSE
 25,249
 
 23,398
 
 72,101
 
 66,228
Income tax expense
 4,679
 
 7,573
 
 13,053
 
 20,525
NET INCOME
 $20,570
 
 $15,825
 
 $59,048
 
 $45,703
 
 
 
 
 
 
 
 
BASIC WEIGHTED AVERAGE COMMON SHARES
 25,301,033
 
 25,193,894
 
 25,284,085
 
 25,176,593
BASIC EARNINGS PER COMMON SHARE
 $0.81
 
 $0.63
 
 $2.33
 
 $1.82
DILUTED WEIGHTED AVERAGE COMMON SHARES
 25,745,151
 
 25,656,403
 
 25,719,693
 
 25,640,742
DILUTED EARNINGS PER COMMON SHARE
 $0.80
 
 $0.62
 
 $2.30
 
 $1.78

The accompanying notes are an integral part of these consolidated financial statements.

 
 
2

 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited - in thousands)
       
     
Three months ended September 30,
 
Nine months ended September 30,
     
2018
 
2017
 
2018
 
2017
Net income
 $               20,570
 
 $                 15,825
 
 $               59,048
 
 $                 45,703
Other comprehensive income (loss)
             
 
Change in securities available for sale:
             
   
Unrealized holding gain (loss) on securities available for sale
             
   
  arising during the period
                   (4,576)
 
                           56
 
                (15,978)
 
                      4,127
   
Reclassification adjustment for (gains)/losses included in net income
0
 
0
 
6
 
(52)
   
Net securities gain (loss) activity during the period
                   (4,576)
 
                           56
 
                (15,972)
 
                      4,075
   
Tax effect
                        960
 
                         (13)
 
                    3,459
 
                    (1,357)
   
Net of tax amount
                   (3,616)
 
                           43
 
                (12,513)
 
                      2,718
 
Defined benefit pension plans:
             
   
Amortization of net actuarial loss
                          67
 
                           66
 
                        200
 
                         199
   
Tax effect
                        (17)
 
                         (26)
 
                        (52)
 
                         (78)
   
Net of tax amount
                          50
 
                           40
 
                        148
 
                         121
                   
   
Total other comprehensive income (loss), net of tax
                   (3,566)
 
                           83
 
                (12,365)
 
                      2,839
                   
Comprehensive income
 $               17,004
 
 $                 15,908
 
 $               46,683
 
 $                 48,542
                   

 

The accompanying notes are an integral part of these consolidated financial statements.




 
3




CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited - in thousands except share and per share data)
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
 
Other
 
 
 
Total
 
 
Common Stock
 
Retained
 
Comprehensive
 
Treasury
 
Stockholders'
 
 
Shares
 
Stock
 
Earnings
 
Income (Loss)
 
Stock
 
Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2017
 24,937,865
 
 $104,405
 
 $327,873
 
 $(2,387)
 
 $(2,913)
 
 $426,978
 
Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
  Net income
 
 
 
 
 45,703
 
 
 
 
 
 45,703
 
  Other comprehensive income (loss), net of tax
 
 
 
 
 
 2,839
 
 
 
 2,839
 
  Cash dividends declared, $0.63 per share
 
 
 
 
 (15,866)
 
 
 
 
 
 (15,866)
 
  Treasury shares purchased under deferred
 
 
 
 
 
 
 
 
 
 
 
 
    directors' plan
 (9,992)
 
 458
 
 
 
 
 
 (458)
 
 0
 
  Stock activity under equity compensation plans
 98,816
 
 (1,736)
 
 
 
 
 
 
 
 (1,736)
 
  Stock based compensation expense
 
 
 4,509
 
 
 
 
 
 
 
 4,509
 
Balance at September 30, 2017
 25,026,689
 
 $107,636
 
 $357,710
 
 $452
 
 $(3,371)
 
 $462,427
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2018
 25,025,933
 
 $108,862
 
 $363,794
 
 $(670)
 
 $(3,408)
 
 $468,578
 
Adoption of ASU 2018-02 (See Note 1)
 
 
 
 
 173
 
 (173)
 
 
 
 0
 
Adoption of ASU 2014-09 (See Note 1)
 
 
 
 
 24
 
 
 
 
 
 24
 
Adoption of ASU 2016-01 (See Note 1)
 
 
 
 
 68
 
 (68)
 
 
 
 0
 
Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
  Net income
 
 
 
 
 59,048
 
 
 
 
 
 59,048
 
  Other comprehensive income (loss), net of tax
 
 
 
 
 
 (12,365)
 
 
 
 (12,365)
 
  Cash dividends declared, $0.74 per share
 
 
 
 
 (18,713)
 
 
 
 
 
 (18,713)
 
  Treasury shares purchased under deferred
 
 
 
 
 
 
 
 
 
 
 
 
    directors' plan
 (8,602)
 
 418
 
 
 
 
 
 (418)
 
 0
 
  Treasury shares sold and distributed under deferred
 
 
 
 
 
 
 
 
 
 
 
    directors' plan
 5,636
 
 (115)
 
 
 
 
 
 115
 
 0
 
  Stock activity under equity compensation plans
 106,829
 
 (2,435)
 
 
 
 
 
 
 
 (2,435)
 
  Stock based compensation expense
 
 
 4,315
 
 
 
 
 
 
 
 4,315
 
Balance at September 30, 2018
 25,129,796
 
 $111,045
 
 $404,394
 
 $(13,276)
 
 $(3,711)
 
 $498,452
 

 
The accompanying notes are an integral part of these consolidated financial statements.





4

 


CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited - in thousands)
Nine Months Ended September 30
2018
 
2017
Cash flows from operating activities:
     
Net income
 $     59,048
 
 $             45,703
Adjustments to reconcile net income to net cash from operating
     
      activities:
     
  Depreciation
            4,199
 
                     3,712
  Provision for loan losses
            6,100
 
                      1,150
  Net loss on sale and write down of other real estate owned
                  16
 
                             21
  Amortization of loan servicing rights
               379
 
                         454
  Loans originated for sale
       (38,926)
 
                (41,472)
  Net gain on sales of loans
          (1,333)
 
                    (1,318)
  Proceeds from sale of loans
         39,448
 
                  43,601
  Net loss on sales of premises and equipment
                 24
 
                            77
  Net loss (gain) on sales and calls of securities available for sale
                   6
 
                          (52)
  Net securities amortization
           2,463
 
                     2,261
  Stock based compensation expense
            4,315
 
                    4,509
  Earnings on life insurance
           (1,177)
 
                   (1,270)
  Gain on life insurance
             (206)
 
                               0
  Tax benefit of stock award issuances
              (761)
 
                       (964)
  Net change:
     
    Interest receivable and other assets
         (4,607)
 
                  (2,770)
    Interest payable and other liabilities
            6,180
 
                       (505)
      Total adjustments
          16,120
 
                    7,434
        Net cash from operating activities
         75,168
 
                  53,137
       
Cash flows from investing activities:
     
  Proceeds from sale of securities available for sale
         12,322
 
                 35,845
  Proceeds from maturities, calls and principal paydowns of
     
    securities available for sale
         42,021
 
                 48,237
  Purchases of securities available for sale
     (100,702)
 
              (114,239)
  Purchase of life insurance
              (371)
 
                       (540)
  Net increase in total loans
       (29,860)
 
             (163,784)
  Proceeds from sales of land, premises and equipment
                 29
 
                             10
  Purchases of land, premises and equipment
         (5,430)
 
                  (8,096)
  Proceeds from sales of other real estate
                  21
 
                          124
  Proceeds from life insurance
               569
 
                               0
        Net cash from investing activities
        (81,401)
 
            (202,443)
       
Cash flows from financing activities:
     
  Net increase in total deposits
           7,269
 
              296,078
  Net increase in short-term borrowings
       106,700
 
                  13,843
  Payments on long-term borrowings
       (80,030)
 
             (180,002)
  Common dividends paid
        (18,700)
 
                (15,853)
  Preferred dividends paid
                (13)
 
                           (13)
  Payments related to equity incentive plans
         (2,435)
 
                   (1,736)
  Purchase of treasury stock
              (418)
 
                       (458)
        Net cash from financing activities
         12,373
 
                 111,859
Net change in cash and cash equivalents
            6,140
 
               (37,447)
Cash and cash equivalents at beginning of the period
        176,180
 
               167,280
Cash and cash equivalents at end of the period
 $    182,320
 
 $           129,833
Cash paid during the period for:
     
    Interest
 $       31,130
 
 $              21,274
    Income taxes
         13,033
 
                   19,818
Supplemental non-cash disclosures:
     
    Loans transferred to other real estate owned
               316
 
                            88
    Securities purchases payable
            4,018
 
                     1,793
       
       

The accompanying notes are an integral part of these consolidated financial statements.
 
 

 
5


NOTE 1. BASIS OF PRESENTATION

This report is filed for Lakeland Financial Corporation (the "Company"), which has two wholly owned subsidiaries, Lake City Bank (the "Bank") and LCB Risk Management, a captive insurance company. Also included in this report is the Bank's wholly owned subsidiary, LCB Investments II, Inc. ("LCB Investments"), which manages the Bank's investment portfolio. LCB Investments owns LCB Funding, Inc. ("LCB Funding"), a real estate investment trust. All significant inter-company balances and transactions have been eliminated in consolidation.

The unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and are unaudited. In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included. Operating results for the three-month and nine-month periods ended September 30, 2018 are not necessarily indicative of the results that may be expected for any subsequent reporting periods, including the year ending December 31, 2018. The Company's 2017 Annual Report on Form 10-K should be read in conjunction with these statements.

Adoption of New Accounting Standards

The Company accounts for revenue in accordance with ASU No. 2014-09, "Revenue from Contracts with Customers" and all the subsequent amendments to the ASU (collectively "ASC 606"), which the Company adopted on January 1, 2018, using the modified retrospective approach. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. We recorded a net increase to opening retained earnings of $24,000 as of January 1, 2018 due to the cumulative impact of adopting ASC 606. Revenue is split between net interest income and noninterest income at a ratio of approximately 80% to 20%, respectively. The scope of the guidance explicitly excludes net interest income as well as many other revenues for financial assets and liabilities including loans, leases, securities, and derivatives. The Company's services that fall within ASC 606 are presented in noninterest income and are recognized as revenue as the Company satisfies its obligation to the customer. The majority of the Company's revenue is from the business of banking and the Company's assigned regions have similar economic characteristics, products, services and customers. Accordingly, all of the Company's operations are considered by management to be aggregated in one reportable operating segment.
The income statement impact of adopting ASC 606 for the three- and nine-month periods ended September 30, 2018 is outlined below:

 
For the three months ended September 30, 2018
 
For the nine months ended September 30, 2018
 
As reported
 
Under legacy GAAP
 
Impact of ASC 606
 
As reported
 
Under legacy GAAP
 
Impact of ASC 606
Noninterest  income
                     
Loan and service fees
 $2,327
 
 $2,135
 
 $192
 
 $6,925
 
 $6,349
 
 $576
Other income
 561
 
 623
 
 (62)
 
 1,816
 
 2,006
 
 (190)
Total
 $2,888
 
 $2,758
 
 $130
 
 $8,741
 
 $8,355
 
 $386
                       
Noninterest expense
                     
Data processing fees and supplies
 2,489
 
 2,359
 
 130
 
 7,292
 
 6,906
 
 386
Total
 $2,489
 
 $2,359
 
 $130
 
 $7,292
 
 $6,906
 
 $386
                       
Net Impact
 $399
 
 $399
 
 $0
 
 $1,449
 
 $1,449
 
 $0
                       
Net income
 $20,142
 
 $20,142
 
 $0
 
 $38,478
 
 $38,478
 
 $0
Comprehensive income
 18,420
 
 18,420
 
 0
 
 29,679
 
 29,679
 
 0
                       
Basic earnings per share
 $0.80
 
 $0.80
 
 $0
 
 $1.52
 
 $1.52
 
 $0
Diluted earnings per share
 0.78
 
 0.78
 
 0
 
 1.50
 
 1.50
 
 0


6

In January 2016, the Financial Accounting Standards Board (the "FASB") amended existing accounting guidance related to the recognition and measurement of financial assets and financial liabilities. These amendments make targeted improvements to U.S. GAAP as follows:  (1) Require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. (2) Simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value. (3) Eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities. (4) Eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. (5) Require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. (6) Require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. (7) Require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements. (8) Clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity's other deferred tax assets. This guidance was effective beginning January 1, 2018. Adopting this standard resulted in a credit to retained earnings for the reclassification in the amount of $68,000.

In August 2016, the FASB issued guidance related to the classification of certain cash receipts and cash payments in the statement of cash flow. This standard provides cash flow statement classification guidance for certain transactions including how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. This guidance was effective beginning January 1, 2018. Adopting this standard did not have a significant impact on the Company's financial condition or results of operations.

In March 2017, the FASB issued ASU No. 2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." Under the new guidance, employers will present the service cost component of the net periodic benefit cost in the same income statement line item as other employee compensation costs arising from services rendered during the period. In addition, only the service cost component will be eligible for capitalization in assets. Employers will present the other components separately from the line item that includes the service cost. The guidance was effective beginning January 1, 2018. As a result of the applicable plans being frozen April 1, 2000, there was no service cost recognized for the nine-month periods ending September 30, 2018 and 2017. All other components of cost were recorded in other expense under noninterest expenses on the Consolidated Statements of Income for all periods presented. Adopting this standard did not have a significant impact on the Company's financial condition or results of operations.

In February 2018, the FASB issued ASU No. 2018-02, "Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." The ASU required a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the newly enacted federal corporate income tax rate as a result of the Tax Cuts and Jobs Act of 2017. The amount reclassified was the difference between the historical corporate income tax rate and the new 21% federal corporate income tax rate. The new guidance is effective for fiscal years beginning after December 15, 2018, and early adoption is permitted. The Company elected to early adopt the guidance during the first quarter of 2018, and recorded a credit to retained earnings for the reclassification in the amount of $173,000 during the first quarter.

Newly Issued But Not Yet Effective Accounting Standards

In February 2016, the FASB issued new accounting guidance related to leases. This update, effective for the Company beginning January 1, 2019, will replace existing lease guidance in GAAP and will require lessees to recognize lease assets and lease liabilities on the balance sheet for all leases and disclose key information about leasing arrangements. When implemented, lessees and lessors will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company currently has approximately $5.6 million of lease obligations that would come on balance sheet as both assets and liabilities upon adoption of this accounting standard.
 
 

 
7

In June 2016, the FASB issued guidance related to credit losses on financial instruments. This update will change the accounting for credit losses on loans and debt securities. The measurement of expected credit losses is to be based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. For loans, this measurement will take place at the time the financial asset is first added to the balance sheet and periodically thereafter. This differs significantly from the "incurred loss" model required under current GAAP, which delays recognition until it is probable a loss has been incurred. In addition, the guidance will modify the other-than-temporary impairment model for available-for-sale debt securities to require an allowance for credit impairment instead of a direct write-down, which will allow for reversal of credit impairments in future periods. This guidance is effective for public business entities that meet the definition of an SEC filer for fiscal years beginning after December 15, 2019, including interim periods in those fiscal years. The Company has formed a cross-functional committee that has evaluated existing technology and other solutions for calculating losses under this new standard, selected a vendor to validate data currently loaded in the technology solution selected, and reviewed the validation assessment report. The committee is currently evaluating the various methods available for calculating the credit losses, including but not limited to discounted cash flows, migration, and vintage. Management expects to recognize credit losses earlier upon adoption of this accounting standard and the expected credit loss model than it has historically done under the current incurred credit loss model and is evaluating the impact of adopting this new accounting standard on our financial statements.

In January 2017, the FASB issued ASU No. 2017-04 "Intangibles - Goodwill and Other - Simplifying the Test for Goodwill Impairment." These amendments eliminate Step 2 from the goodwill impairment test. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The guidance is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. ASU 2017-04 should be adopted on a prospective basis. Management does not expect the adoption of this new accounting standard to have a material impact on our financial statements.

In March 2017, the FASB issued ASU No. 2017-08, "Receivables—Nonrefundable Fees and Other Costs: Premium Amortization on Purchased Callable Debt Securities." This update amends the amortization period for certain purchased callable debt securities held at a premium. FASB is shortening the amortization period for the premium to the earliest call date. Under current GAAP, entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument. Concerns were raised that current GAAP excludes certain callable debt securities from consideration of early repayment of principal even if the holder is certain that the call will be exercised. As a result, upon the exercise of a call on a callable debt security held at a premium, the unamortized premium is recorded as a loss in earnings. There is diversity in practice (1) in the amortization period for premiums of callable debt securities and (2) in how the potential for exercise of a call is factored into current impairment assessments. The amendments in this update become effective for annual periods and interim periods within those annual periods beginning after December 15, 2018. Management is evaluating the impact of adopting the new guidance on our consolidated financial statements on a quarterly basis, and plans to adopt on January 1, 2019.  The Company estimates the impact of this standard as of September 30, 2018, would be a reduction to retained earnings of approximately $940,000, net of tax, to reflect the acceleration of amortization of premiums on debt securities.

In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities". The purpose of this updated guidance is to better align a company's financial reporting for hedging activities with the economic objectives of those activities. ASU 2017-12 is effective for public business entities for fiscal years beginning after December 15, 2018, with early adoption, including adoption in an interim period, permitted. The Company plans to adopt ASU 2017-12 on January 1, 2019. ASU 2017-12 requires a modified retrospective transition method in which the Company will recognize the cumulative effect of the change on the opening balance of each affected component of equity in the statement of financial position as of the date of adoption. While the Company continues to assess all potential impacts of the standard, we currently expect adoption to have an immaterial impact on our consolidated financial statements.

Reclassifications

Certain amounts appearing in the financial statements and notes thereto for prior periods have been reclassified to conform with the current presentation. The reclassifications had no effect on net income or stockholders' equity as previously reported.

8

NOTE 2. SECURITIES

Information related to the fair value and amortized cost of securities available for sale and the related gross unrealized gains and losses recognized in accumulated other comprehensive income is provided in the tables below.


     
Gross
 
Gross
   
 
Amortized
 
Unrealized
 
Unrealized
 
Fair
(dollars in thousands)
Cost
 
Gain
 
Losses
 
Value
September 30, 2018
             
  U.S. Treasury securities
 $993
 
 $0
 
 $(20)
 
 $973
  U.S. government sponsored agencies
4,649
 
0
 
(189)
 
4,460
  Mortgage-backed securities: residential
327,270
 
814
 
(10,069)
 
318,015
  Mortgage-backed securities: commercial
39,050
 
0
 
(959)
 
38,091
  State and municipal securities
213,361
 
584
 
(4,916)
 
209,029
    Total
 $585,323
 
 $1,398
 
 $(16,153)
 
 $570,568
               
December 31, 2017
             
  U.S. Treasury securities
 $992
 
 $5
 
 $0
 
 $997
  U.S. government sponsored agencies
5,191
 
0
 
(69)
 
5,122
  Mortgage-backed securities: residential
314,650
 
2,099
 
(2,975)
 
313,774
  Mortgage-backed securities: commercial
44,208
 
75
 
(72)
 
44,211
  State and municipal securities
172,375
 
2,990
 
(976)
 
174,389
    Total
 $537,416
 
 $5,169
 
 $(4,092)
 
 $538,493


Information regarding the fair value and amortized cost of available for sale debt securities by maturity as of September 30, 2018 is presented below. Maturity information is based on contractual maturity for all securities other than mortgage-backed securities. Actual maturities of securities may differ from contractual maturities because borrowers may have the right to prepay the obligation without a prepayment penalty.


 
Amortized
 
Fair
(dollars in thousands)
Cost
 
Value
Due in one year or less
 $2,548
 
 $2,558
Due after one year through five years
23,823
 
23,868
Due after five years through ten years
35,378
 
34,968
Due after ten years
157,254
 
153,068
 
219,003
 
214,462
Mortgage-backed securities
366,320
 
356,106
  Total debt securities
 $585,323
 
 $570,568
 
Securities proceeds, gross gains and gross losses are presented below.


 
Nine months ended September 30,
(dollars in thousands)
2018
 
2017
Sales of securities available for sale
     
  Proceeds
 $12,322
 
 $35,845
  Gross gains
21
 
256
  Gross losses
(27)
 
(204)
  Number of securities
22
 
35


Purchase premiums or discounts are recognized in interest income using the interest method over the terms of the securities or over the estimated lives of mortgage-backed securities. Gains and losses on sales are based on the amortized cost of the security sold and recorded on the trade date.
 

 
9

Securities with carrying values of $166.9 million and $171.1 million were pledged as of September 30, 2018 and December 31, 2017, respectively, as collateral for securities sold under agreements to repurchase, borrowings from the Federal Home Loan Bank and for other purposes as permitted or required by law.

Information regarding securities with unrealized losses as of September 30, 2018 and December 31, 2017 is presented below. The tables divide the securities between those with unrealized losses for less than twelve months and those with unrealized losses for twelve months or more.


 
Less than 12 months
 
12 months or more
 
Total
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
Fair
 
Unrealized
(dollars in thousands)
Value
 
Losses
 
Value
 
Losses
 
Value
 
Losses
September 30, 2018
                     
U.S. Treasury
 $973
 
 $20
 
 $0
 
 $0
 
 $973
 
 $20
U.S. government sponsored agencies
1,958
 
58
 
2,502
 
131
 
4,460
 
189
Mortgage-backed securities: residential
146,933
 
3,103
 
145,962
 
6,966
 
292,895
 
10,069
Mortgage-backed securities: commercial
38,091
 
959
 
0
 
0
 
38,091
 
959
State and municipal securities
106,622
 
2,114
 
50,845
 
2,802
 
157,467
 
4,916
  Total temporarily impaired
 $294,577
 
 $6,254
 
 $199,309
 
 $9,899
 
 $493,886
 
 $16,153
                       
December 31, 2017
                     
U.S. government sponsored agencies
 $2,353
 
 $6
 
 $2,769
 
 $63
 
 $5,122
 
 $69
Mortgage-backed securities: residential
142,834
 
1,412
 
59,024
 
1,563
 
201,858
 
2,975
Mortgage-backed securities: commercial
23,505
 
72
 
0
 
0
 
23,505
 
72
State and municipal securities
8,585
 
47
 
49,552
 
929
 
58,137
 
976
  Total temporarily impaired
 $177,277
 
 $1,537
 
 $111,345
 
 $2,555
 
 $288,622
 
 $4,092


The total number of securities with unrealized losses as of September 30, 2018 and December 31, 2017 is presented below.


 
Less than
 
12 months
   
 
12 months
 
or more
 
Total
September 30, 2018
         
U.S. Treasury
1
 
0
 
1
U.S. government sponsored agencies
1
 
1
 
2
Mortgage-backed securities: residential
56
 
54
 
110
Mortgage-backed securities: commercial
9
 
0
 
9
State and municipal securities
129
 
68
 
197
  Total temporarily impaired
196
 
123
 
319
           
December 31, 2017
         
U.S. government sponsored agencies
1
 
1
 
2
Mortgage-backed securities: residential
46
 
21
 
67
Mortgage-backed securities: commercial
5
 
0
 
5
State and municipal securities
17
 
62
 
79
  Total temporarily impaired
69
 
84
 
153

The following factors are considered in determining whether or not the impairment of these securities is other-than-temporary. In making this determination, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer, as well as the underlying fundamentals of the relevant market and the outlook for such market in the near future. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) OTTI related to other factors, which is recognized in other comprehensive income. Credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. As of September 30, 2018 and December 31, 2017, all of the securities in the Company's portfolio were backed by the U.S. government, government agencies, government sponsored entities or were A-rated or better, except for certain non-local or local municipal securities, which are not rated. For the government, government agency, government-sponsored entity and municipal securities, management did not believe that there would be credit losses or that full principal would not be received. Management considers the unrealized losses on these securities to be primarily interest rate driven and does not expect material losses given current market conditions unless the securities are sold. However, at this time management does not have the intent to sell, and it is more likely than not that the Company will not be required to sell these securities before the recovery of their amortized cost basis.
 

 
10

NOTE 3. LOANS


 
September 30,
December 31,
(dollars in thousands)
2018
2017
Commercial and industrial loans:
           
  Working capital lines of credit loans
 $757,004
 19.7
 %
 $743,609
 19.4
 %
  Non-working capital loans
 693,402
 18.0
 
 675,072
 17.7
 
    Total commercial and industrial loans
 1,450,406
 37.7
 
 1,418,681
 37.1
 
             
Commercial real estate and multi-family residential loans:
           
  Construction and land development loans
 231,795
 6.0
 
 224,474
 5.9
 
  Owner occupied loans
 571,998
 14.9
 
 538,603
 14.1
 
  Nonowner occupied loans
 520,414
 13.5
 
 508,121
 13.3
 
  Multifamily loans
 192,218
 5.0
 
 173,715
 4.5
 
    Total commercial real estate and multi-family residential loans
 1,516,425
 39.4
 
 1,444,913
 37.8
 
             
Agri-business and agricultural loans:
           
  Loans secured by farmland
159,256
 4.2
 
186,437
 4.9
 
  Loans for agricultural production
134,773
 3.5
 
196,404
 5.1
 
    Total agri-business and agricultural loans
294,029
 7.7
 
382,841
 10.0
 
             
Other commercial loans
 114,350
 3.0
 
 124,076
 3.3
 
  Total commercial loans
 3,375,210
 87.8
 
 3,370,511
 88.2
 
             
Consumer 1-4 family mortgage loans:
           
  Closed end first mortgage loans
 185,212
 4.8
 
 179,302
 4.7
 
  Open end and junior lien loans
 185,869
 4.8
 
 181,865
 4.8
 
  Residential construction and land development loans
 15,128
 0.4
 
 13,478
 0.3
 
  Total consumer 1-4 family mortgage loans
 386,209
 10.0
 
 374,645
 9.8
 
             
Other consumer loans
 83,203
 2.2
 
 74,369
 2.0
 
  Total consumer loans
 469,412
 12.2
 
 449,014
 11.8
 
  Subtotal
 3,844,622
 100.0
 %
 3,819,525
 100.0
 %
Less:  Allowance for loan losses
 (48,343)
   
 (47,121)
   
           Net deferred loan fees
 (1,497)
   
 (1,066)
   
Loans, net
 $3,794,782
   
 $3,771,338
   
 
The recorded investment in loans does not include accrued interest.

The Company had $614,000 in residential real estate loans in the process of foreclosure as of September 30, 2018, compared to $47,000 as of December 31, 2017.


11



NOTE 4. ALLOWANCE FOR LOAN LOSSES AND CREDIT QUALITY

The following tables present the activity in the allowance for loan losses by portfolio segment for the three-month periods ended September 30, 2018 and 2017:


     
Commercial
                       
     
Real Estate
                       
 
Commercial
 
and
 
Agri-business
     
Consumer
           
 
and
 
Multifamily
 
and
 
Other
 
1-4 Family
 
Other
       
(dollars in thousands)
Industrial
 
Residential
 
Agricultural
 
Commercial
 
Mortgage
 
Consumer
 
Unallocated
 
Total
Three Months Ended September 30, 2018
                           
Beginning balance, July 1
 $22,524
 
 $14,954
 
 $4,585
 
 $464
 
 $1,953
 
 $266
 
 $2,960
 
 $47,706
  Provision for loan losses
952
 
140
 
(506)
 
(23)
 
321
 
62
 
154
 
1,100
  Loans charged-off
(474)
 
0
 
0
 
0
 
(24)
 
(83)
 
0
 
(581)
  Recoveries
69
 
7
 
5
 
0
 
6
 
31
 
0
 
118
    Net loans charged-off
(405)
 
7
 
5
 
0
 
(18)
 
(52)
 
0
 
(463)
Ending balance
 $23,071
 
 $15,101
 
 $4,084
 
 $441
 
 $2,256
 
 $276
 
 $3,114
 
 $48,343


     
Commercial
                       
     
Real Estate
                       
 
Commercial
 
and
 
Agri-business
     
Consumer
           
 
and
 
Multifamily
 
and
 
Other
 
1-4 Family
 
Other
       
(dollars in thousands)
Industrial
 
Residential
 
Agricultural
 
Commercial
 
Mortgage
 
Consumer
 
Unallocated
 
Total
Three Months Ended September 30, 2017
                             
Beginning balance, July 1
 $20,219
 
 $13,775
 
 $3,870
 
 $568
 
 $2,689
 
 $389
 
 $3,053
 
 $44,563
  Provision for loan losses
(612)
 
426
 
425
 
108
 
30
 
15
 
58
 
450
  Loans charged-off
(44)
 
0
 
0
 
0
 
(40)
 
(86)
 
0
 
(170)
  Recoveries
364
 
246
 
7
 
0
 
11
 
26
 
0
 
654
    Net loans charged-off
320
 
246
 
7
 
0
 
(29)
 
(60)
 
0
 
484
Ending balance
 $19,927
 
 $14,447
 
 $4,302
 
 $676
 
 $2,690
 
 $344
 
 $3,111
 
 $45,497


The following tables present the activity in the allowance for loan losses by portfolio segment for the nine-month periods ended September 30, 2018 and 2017:


     
Commercial
                       
     
Real Estate
                       
 
Commercial
 
and
 
Agri-business
     
Consumer
           
 
and
 
Multifamily
 
and
 
Other
 
1-4 Family
 
Other
       
(dollars in thousands)
Industrial
 
Residential
 
Agricultural
 
Commercial
 
Mortgage
 
Consumer
 
Unallocated
 
Total
Nine Months Ended September 30, 2018
                           
Beginning balance, January 1
 $21,097
 
 $14,714
 
 $4,920
 
 $577
 
 $2,768
 
 $379
 
 $2,666
 
 $47,121
  Provision for loan losses
6,246
 
855
 
(850)
 
(136)
 
(541)
 
78
 
448
 
6,100
  Loans charged-off
(4,891)
 
(491)
 
0
 
0
 
(31)
 
(273)
 
0
 
(5,686)
  Recoveries
619
 
23
 
14
 
0
 
60
 
92
 
0
 
808
    Net loans charged-off
(4,272)
 
(468)
 
14
 
0
 
29
 
(181)
 
0
 
(4,878)
Ending balance
 $23,071
 
 $15,101
 
 $4,084
 
 $441
 
 $2,256
 
 $276
 
 $3,114
 
 $48,343



     
Commercial
                       
     
Real Estate
                       
 
Commercial
 
and
 
Agri-business
     
Consumer
           
 
and
 
Multifamily
 
and
 
Other
 
1-4 Family
 
Other
       
(dollars in thousands)
Industrial
 
Residential
 
Agricultural
 
Commercial
 
Mortgage
 
Consumer
 
Unallocated
 
Total
Nine Months Ended September 30, 2017
                             
Beginning balance, January 1
 $20,272
 
 $13,452
 
 $3,532
 
 $461
 
 $2,827
 
 $387
 
 $2,787
 
 $43,718
  Provision for loan losses
(791)
 
744
 
753
 
215
 
(170)
 
75
 
324
 
1,150
  Loans charged-off
(430)
 
(259)
 
0
 
0
 
(53)
 
(192)
 
0
 
(934)
  Recoveries
876
 
510
 
17
 
0
 
86
 
74
 
0
 
1,563
    Net loans charged-off
446
 
251
 
17
 
0
 
33
 
(118)
 
0
 
629
Ending balance
 $19,927
 
 $14,447
 
 $4,302
 
 $676
 
 $2,690
 
 $344
 
 $3,111
 
 $45,497


12



The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of September 30, 2018 and December 31, 2017:


     
Commercial
                       
     
Real Estate
                       
 
Commercial
 
and
 
Agri-business
     
Consumer
           
 
and
 
Multifamily
 
and
 
Other
 
1-4 Family
 
Other
       
(dollars in thousands)
Industrial
 
Residential
 
Agricultural
 
Commercial
 
Mortgage
 
Consumer
 
Unallocated
 
Total
September 30, 2018
                             
Allowance for loan losses:
                             
  Ending allowance balance attributable to loans:
                           
    Individually evaluated for impairment
 $4,798
 
 $771
 
 $0
 
 $0
 
 $439
 
 $26
 
 $0
 
 $6,034
    Collectively evaluated for impairment
18,273
 
14,330
 
4,084
 
441
 
1,817
 
250
 
3,114
 
42,309
Total ending allowance balance
 $23,071
 
 $15,101
 
 $4,084
 
 $441
 
 $2,256
 
 $276
 
 $3,114
 
 $48,343
                               
Loans:
                             
  Loans individually evaluated for impairment
 $14,280
 
 $4,108
 
 $283
 
 $0
 
 $2,193
 
 $46
 
 $0
 
 $20,910
  Loans collectively evaluated for impairment
1,436,066
 
1,509,970
 
293,836
 
114,211
 
385,215
 
82,917
 
0
 
3,822,215
Total ending loans balance
 $1,450,346
 
 $1,514,078
 
 $294,119
 
 $114,211
 
 $387,408
 
 $82,963
 
 $0
 
 $3,843,125
                               


     
Commercial
                       
     
Real Estate
                       
 
Commercial
 
and
 
Agri-business
     
Consumer
           
 
and
 
Multifamily
 
and
 
Other
 
1-4 Family
 
Other
       
(dollars in thousands)
Industrial
 
Residential
 
Agricultural
 
Commercial
 
Mortgage
 
Consumer
 
Unallocated
 
Total
December 31, 2017
                             
Allowance for loan losses:
                             
  Ending allowance balance attributable to loans:
                           
    Individually evaluated for impairment
 $2,067
 
 $795
 
 $0
 
 $0
 
 $310
 
 $44
 
 $0
 
 $3,216
    Collectively evaluated for impairment
19,030
 
13,919
 
4,920
 
577
 
2,458
 
335
 
2,666
 
43,905
Total ending allowance balance
 $21,097
 
 $14,714
 
 $4,920
 
 $577
 
 $2,768
 
 $379
 
 $2,666
 
 $47,121
                               
Loans:
                             
  Loans individually evaluated for impairment
 $6,979
 
 $4,802
 
 $283
 
 $0
 
 $1,756
 
 $50
 
 $0
 
 $13,870
  Loans collectively evaluated for impairment
1,411,648
 
1,438,219
 
382,643
 
123,922
 
374,013
 
74,144
 
0
 
3,804,589
Total ending loans balance
 $1,418,627
 
 $1,443,021
 
 $382,926
 
 $123,922
 
 $375,769
 
 $74,194
 
 $0
 
 $3,818,459



13


 

The following table presents loans individually evaluated for impairment by class of loans as of September 30, 2018:


 
Unpaid
     
Allowance for
 
Principal
 
Recorded
 
Loan Losses
(dollars in thousands)
Balance
 
Investment
 
Allocated
With no related allowance recorded:
         
  Commercial and industrial loans:
         
    Working capital lines of credit loans
 $3,483
 
 $792
 
 $0
    Non-working capital loans
4,789
 
2,444
 
0
  Commercial real estate and multi-family residential loans:
         
    Construction and land development loans
18
 
18
 
0
    Owner occupied loans
2,276
 
1,671
 
0
  Agri-business and agricultural loans:
         
    Loans secured by farmland
603
 
283
 
0
  Consumer 1-4 family loans:
         
    Closed end first mortgage loans
590
 
509
 
0
    Open end and junior lien loans
243
 
244
 
0
With an allowance recorded:
         
  Commercial and industrial loans:
         
    Working capital lines of credit loans
3,649
 
3,653
 
897
    Non-working capital loans
7,391
 
7,391
 
3,901
  Commercial real estate and multi-family residential loans:
         
    Construction and land development loans
303
 
303
 
154
    Owner occupied loans
2,250
 
2,116
 
617
  Consumer 1-4 family mortgage loans:
         
    Closed end first mortgage loans
1,439
 
1,440
 
439
  Other consumer loans
46
 
46
 
26
Total
 $27,080
 
 $20,910
 
 $6,034




 


14

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2017:


 
Unpaid
     
Allowance for
 
Principal
 
Recorded
 
Loan Losses
(dollars in thousands)
Balance
 
Investment
 
Allocated
With no related allowance recorded:
         
  Commercial and industrial loans:
         
    Working capital lines of credit loans
 $491
 
 $491
 
 $0
    Non-working capital loans
2,973
 
1,579
 
0
  Commercial real estate and multi-family residential loans:
         
    Construction and land development loans
88
 
88
 
0
    Owner occupied loans
2,558
 
2,310
 
0
  Agri-business and agricultural loans:
         
    Loans secured by farmland
603
 
283
 
0
  Consumer 1-4 family loans:
         
    Closed end first mortgage loans
636
 
570
 
0
With an allowance recorded:
         
  Commercial and industrial loans:
         
    Working capital lines of credit loans
1,617
 
1,617
 
667
    Non-working capital loans
3,292
 
3,292
 
1,400
  Commercial real estate and multi-family residential loans:
         
    Construction and land development loans
827
 
827
 
350
    Owner occupied loans
1,577
 
1,577
 
445
  Consumer 1-4 family mortgage loans:
         
    Closed end first mortgage loans
950
 
950
 
269
    Open end and junior lien loans
235
 
236
 
41
  Other consumer loans
50
 
50
 
44
Total
 $15,897
 
 $13,870
 
 $3,216






15

The following table presents loans individually evaluated for impairment by class of loans as of and for the three-month period ended September 30, 2018:


         
Cash Basis
 
Average
 
Interest
 
Interest
 
Recorded
 
Income
 
Income
(dollars in thousands)
Investment
 
Recognized
 
Recognized
With no related allowance recorded:
         
  Commercial and industrial loans:
         
    Working capital lines of credit loans
 $955
 
 $13
 
 $7
    Non-working capital loans
2,027
 
19
 
17
  Commercial real estate and multi-family residential loans:
         
    Construction and land development loans
41
 
1
 
1
    Owner occupied loans
1,903
 
9
 
11
  Agri-business and agricultural loans:
         
    Loans secured by farmland
283
 
0
 
0
  Consumer 1-4 family loans:
         
    Closed end first mortgage loans
503
 
3
 
3
    Open end and junior lien loans
244
 
0
 
0
With an allowance recorded:
         
  Commercial and industrial loans:
         
    Working capital lines of credit loans
4,019
 
6
 
6
    Non-working capital loans
6,385
 
37
 
19
  Commercial real estate and multi-family residential loans:
         
    Construction and land development loans
307
 
5
 
8
    Owner occupied loans
2,183
 
0
 
0
  Consumer 1-4 family mortgage loans:
         
    Closed end first mortgage loans
1,374
 
14
 
13
  Other consumer loans
46
 
1
 
0
Total
 $20,270
 
 $108
 
 $85





 


16

The following table presents loans individually evaluated for impairment by class of loans as of and for the three-month period ended September 30, 2017:


         
Cash Basis
 
Average
 
Interest
 
Interest
 
Recorded
 
Income
 
Income
(dollars in thousands)
Investment
 
Recognized
 
Recognized
With no related allowance recorded:
         
  Commercial and industrial loans:
         
    Working capital lines of credit loans
 $315
 
 $14
 
 $11
    Non-working capital loans
1,321
 
18
 
18
  Commercial real estate and multi-family residential loans:
         
    Construction and land development loans
100
 
3
 
3
    Owner occupied loans
2,222
 
2
 
2
    Nonowner occupied loans
2,784
 
152
 
152
  Agri-business and agricultural loans:
         
    Loans secured by farmland
301
 
0
 
0
  Consumer 1-4 family loans:
         
    Closed end first mortgage loans
342
 
3
 
3
    Open end and junior lien loans
101
 
0
 
0
With an allowance recorded:
         
  Commercial and industrial loans:
         
    Working capital lines of credit loans
2,529
 
22
 
22
    Non-working capital loans
5,700
 
74
 
74
  Commercial real estate and multi-family residential loans:
         
    Owner occupied loans
1,714
 
9
 
9
  Agri-business and agricultural loans:
         
    Loans secured by farmland
10
 
0
 
0
  Consumer 1-4 family mortgage loans:
         
    Closed end first mortgage loans
969
 
13
 
13
    Open end and junior lien loans
81
 
0
 
0
  Other consumer loans
52
 
1
 
1
Total
 $18,541
 
 $311
 
 $308



17



 

The following table presents loans individually evaluated for impairment by class of loans as of and for the nine-month period ended September 30, 2018:


         
Cash Basis
 
Average
 
Interest
 
Interest
 
Recorded
 
Income
 
Income
(dollars in thousands)
Investment
 
Recognized
 
Recognized
With no related allowance recorded:
         
  Commercial and industrial loans:
         
    Working capital lines of credit loans
 $992
 
 $26
 
 $23
    Non-working capital loans
1,831
 
50
 
48
  Commercial real estate and multi-family residential loans:
         
    Construction and land development loans
77
 
4
 
4
    Owner occupied loans
2,443
 
25
 
25
  Agri-business and agricultural loans:
         
    Loans secured by farmland
283
 
0
 
0
  Consumer 1-4 family loans:
         
    Closed end first mortgage loans
526
 
7
 
7
    Open end and junior lien loans
194
 
0
 
0
With an allowance recorded:
         
  Commercial and industrial loans:
         
    Working capital lines of credit loans
2,878
 
10
 
9
    Non-working capital loans
4,371
 
42
 
25
  Commercial real estate and multi-family residential loans:
         
    Construction and land development loans
506
 
22
 
26
    Owner occupied loans
1,473
 
1
 
1
  Consumer 1-4 family mortgage loans:
         
    Closed end first mortgage loans
1,112
 
29
 
27
    Open end and junior lien loans
51
 
0
 
0
  Other consumer loans
48
 
2
 
2
Total
 $16,785
 
 $218
 
 $197




18



 

The following table presents loans individually evaluated for impairment by class of loans as of and for the nine-month period ended September 30, 2017:


         
Cash Basis
 
Average
 
Interest
 
Interest
 
Recorded
 
Income
 
Income
(dollars in thousands)
Investment
 
Recognized
 
Recognized
With no related allowance recorded:
         
  Commercial and industrial loans:
         
    Working capital lines of credit loans
 $485
 
 $22
 
 $19
    Non-working capital loans
1,337
 
27
 
27
  Commercial real estate and multi-family residential loans:
         
    Construction and land development loans
117
 
4
 
4
    Owner occupied loans
2,395
 
4
 
4
    Nonowner occupied loans
3,397
 
222
 
222
  Agri-business and agricultural loans:
         
    Loans secured by farmland
289
 
0
 
0
  Consumer 1-4 family loans:
         
    Closed end first mortgage loans
249
 
5
 
5
    Open end and junior lien loans
137
 
0
 
0
With an allowance recorded:
         
  Commercial and industrial loans:
         
    Working capital lines of credit loans
2,090
 
33
 
33
    Non-working capital loans
6,418
 
116
 
116
  Commercial real estate and multi-family residential loans:
         
    Owner occupied loans
1,641
 
12
 
11
  Agri-business and agricultural loans:
         
    Loans secured by farmland
3
 
0
 
0
  Consumer 1-4 family mortgage loans:
         
    Closed end first mortgage loans
1,023
 
18
 
16
    Open end and junior lien loans
27
 
0
 
0
  Other consumer loans
53
 
2
 
2
Total
 $19,661
 
 $465
 
 $459


19

The following table presents the ageing of the recorded investment in past due loans as of September 30, 2018 by class of loans:


     
30-89
 
Greater than
     
Total Past
   
 
Loans Not
 
Days
 
90 Days
     
Due and
   
(dollars in thousands)
Past Due
 
Past Due
 
Past Due
 
Nonaccrual
 
Nonaccrual
 
Total
  Commercial and industrial loans:
                     
    Working capital lines of credit loans
 $748,308
 
 $4,853
 
 $0
 
 $3,954
 
 $8,807
 
 $757,115
    Non-working capital loans
681,687
 
7,443
 
0
 
4,101
 
11,544
 
693,231
  Commercial real estate and multi-family
                     
  residential loans:
                     
    Construction and land development loans
230,522
     
0
 
0
 
0
 
230,522
    Owner occupied loans
568,463
 
0
 
0
 
3,173
 
3,173
 
571,636
    Nonowner occupied loans
520,077
 
0
 
0
 
0
 
0
 
520,077
    Multifamily loans
191,843
 
0
 
0
 
0
 
0
 
191,843
  Agri-business and agricultural loans:
                     
    Loans secured by farmland
158,979
 
0
 
0
 
283
 
283
 
159,262
    Loans for agricultural production
134,845
 
12
 
0
 
0
 
12
 
134,857
  Other commercial loans
114,211
 
0
 
0
 
0
 
0
 
114,211
  Consumer 1-4 family mortgage loans:
                     
    Closed end first mortgage loans
183,328
 
941
 
0
 
586
 
1,527
 
184,855
    Open end and junior lien loans
187,113
 
96
 
0
 
244
 
340
 
187,453
    Residential construction loans
15,100
 
0
 
0
 
0
 
0
 
15,100
  Other consumer loans
82,826
 
137
 
0
 
0
 
137
 
82,963
Total
 $3,817,302
 
 $13,482
 
 $0
 
 $12,341
 
 $25,823
 
 $3,843,125

The following table presents the ageing of the recorded investment in past due loans as of December 31, 2017 by class of loans:


     
30-89
 
Greater than
     
Total Past
   
 
Loans Not
 
Days
 
90 Days
     
Due and
   
(dollars in thousands)
Past Due
 
Past Due
 
Past Due
 
Nonaccrual
 
Nonaccrual
 
Total
  Commercial and industrial loans:
                     
    Working capital lines of credit loans
 $742,205
 
 $11
 
 $0
 
 $1,459
 
 $1,470
 
 $743,675
    Non-working capital loans
671,490
 
0
 
0
 
3,462
 
3,462
 
674,952
  Commercial real estate and multi-family
                     
  residential loans:
                     
    Construction and land development loans
215,713
 
8,000
 
0
 
0
 
8,000
 
223,713
    Owner occupied loans
534,648
 
0
 
0
 
3,620
 
3,620
 
538,268
    Nonowner occupied loans
507,696
 
0
 
0
 
0
 
0
 
507,696
    Multifamily loans
173,100
 
244
 
0
 
0
 
244
 
173,344
  Agri-business and agricultural loans:
                     
    Loans secured by farmland
186,160
 
0
 
0
 
283
 
283
 
186,443
    Loans for agricultural production
196,483
 
0
 
0
 
0
 
0
 
196,483
  Other commercial loans
123,922
 
0
 
0
 
0
 
0
 
123,922
  Consumer 1-4 family mortgage loans:
                     
    Closed end first mortgage loans
177,410
 
1,183
 
6
 
342
 
1,531
 
178,941
    Open end and junior lien loans
183,056
 
89
 
0
 
236
 
325
 
183,381
    Residential construction loans
13,447
 
0
 
0
 
0
 
0
 
13,447
  Other consumer loans
74,102
 
92
 
0
 
0
 
92
 
74,194
Total
 $3,799,432
 
 $9,619
 
 $6
 
 $9,402
 
 $19,027
 
 $3,818,459

20

Troubled Debt Restructurings:

Troubled debt restructured loans are included in the totals for impaired loans. The Company has allocated $2.1 million and $2.3 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of September 30, 2018 and December 31, 2017, respectively. The Company is not committed to lend additional funds to debtors whose loans have been modified in a troubled debt restructuring.


 
September 30
 
December 31
(dollars in thousands)
2018
 
2017
Accruing troubled debt restructured loans
 $3,512
 
 $2,893
Nonaccrual troubled debt restructured loans
 7,313
 
 7,750
Total troubled debt restructured loans
 $10,825
 
 $10,643


During the three months ending September 30, 2018, two commercial and industrial loans were modified as troubled debt restructurings due to a modification of the repayment terms which delays principal repayment for an extended period of time. These concessions are included in the table below.

Additional concessions were granted to borrowers with previously identified troubled debt restructured loans during the three-month period ended September 30, 2018.  The loan to one of the borrowers is for a commercial real estate building where the collateral value and cash flows from the company occupying the building do not support the loan with a recorded investment of $852,000.  The loan to another one of the borrowers is for a vacant commercial real estate building that does not generate cash flow to support the loan with a recorded investment of $321,000.  The other loans are to a borrower for an investment in land for residential development which has not had sales activity to support loans with a recorded investment of $109,000.  These troubled debt restructured loans with additional concessions decreased the allowance by $7,000 as a result of payments received during the period and resulted in no charge-offs for the three-month period ending September 30, 2018. These concessions are not included in the table below.
The following table presents loans by class modified as new troubled debt restructurings that occurred during the three months ended September 30, 2018:


     
Modified Repayment Terms
     
Pre-Modification
 
Post-Modification
     
Extension
     
Outstanding
 
Outstanding
     
Period or
 
Number of
 
Recorded
 
Recorded
 
Number of
 
Range
(dollars in thousands)
Loans
 
Investment
 
Investment
 
Loans
 
(in months)
Troubled Debt Restructurings
                 
Commercial and industrial loans:
                 
  Non-working capital loans
2
 
 $824
 
 $824
 
2
 
0-6
Total
2
 
 $824
 
 $824
 
2
 
0-6


For the three month period ending September 30, 2018, the troubled debt restructurings described above did not impact the allowance for loan losses and no charge-offs were recorded.

During the nine months ended September 30, 2018, certain loans were modified as troubled debt restructurings. The modified terms of these loans include one or a combination of the following: inadequate compensation for the terms of the restructure or renewal; a modification of the repayment terms which delays principal repayment for some period; or renewal terms offered to borrowers in financial distress where no additional credit enhancements were obtained at the time of renewal. These concessions are included in the table below.

Additional concessions were granted to borrowers with previously identified troubled debt restructured loans during the nine-month period ended September 30, 2018.  There were three commercial real estate loans with recorded investments totaling $1.3 million and three commercial and industrial loans with recorded investments totaling $1.4 million where the collateral value and/or cash flows do not support those loans. The other three loans are to borrowers for investments in land for residential development which have not had sales activity to support loans with a recorded investments totaling $593,000. These troubled debt restructured loans with additional concessions increased the allowance by $255,000 and resulted in no charge-offs for the nine-month period ending September 30, 2018. These concessions are not included in the table below.
 

21

The following table presents loans by class modified as new troubled debt restructurings that occurred during the nine months ended September 30, 2018:


     
Modified Repayment Terms
     
Pre-Modification
 
Post-Modification
     
Extension
     
Outstanding
 
Outstanding
     
Period or
 
Number of
 
Recorded
 
Recorded
 
Number of
 
Range
(dollars in thousands)
Loans
 
Investment
 
Investment
 
Loans
 
(in months)
Troubled Debt Restructurings
                 
Commercial and industrial loans:
                 
  Working capital lines of credit loans
1
 
 $600
 
 $600
 
1
 
0
  Non-working capital loans
4
 
 2,244
 
 2,244
 
4
 
0-6
Commercial real estate and multi-
                 
  family residential loans:
                 
  Construction and land
                 
    development loans
1
 
 824
 
 824
 
1
 
12
  Owner occupied loans
1
 
 387
 
 387
 
1
 
12
Consumer 1-4 family loans:
                 
  Closed end first mortgage loans
1
 
 198
 
 197
 
1
 
239
Total
8
 
 $4,253
 
 $4,252
 
8
 
0-239


For the nine-month period ending September 30, 2018, the commercial real estate and multi-family residential troubled debt restructurings described above decreased the allowance for loan losses by $196,000, and resulted in charge-offs of $1.6 million.  All other troubled debt restructurings described above had no impact to the allowance and no charge-offs were recorded for the nine month period ending September 30, 2018.

During the three months ended September 30, 2017, certain loans were modified as troubled debt restructurings due to a modification of the repayment terms which delays principal repayment for an extended period of time. These concessions are included in the table below.

Additional concessions were granted to borrowers with previously identified troubled debt restructured loans during the period.  The loans to two of the borrowers are for commercial real estate buildings where the collateral value and cash flows from the companies occupying the buildings do not support the loans with recorded investments of $1.4 million.  The loans to three other borrowers are for commercial and industrial non-working capital loans with recorded investments of $1.8 million. These troubled debt restructured loans with additional concessions decreased the allowance by $7,000 as a result of payments received during the period and resulted in no charge-offs for the three-month period ending September 30, 2017. These concessions are not included in the table below.
 
 

 
22

The following table presents loans by class modified as new troubled debt restructurings that occurred during the three months ended September 30, 2017:


             
Modified Repayment Terms
     
Pre-Modification
        Post-Modification                                                                         Extension
     
Outstanding
Outstanding
   
Period or
 
Number of
Recorded
 
Recorded
 
Number of
 
Range
(dollars in thousands)
Loans
 
Investment
 
Investment
 
Loans
 
(in months)
Troubled Debt Restructurings
                 
Commercial and industrial loans:
               
  Working capital lines of credit loans
1
 
 $                         1,324
 
 $                         1,324
 
1
 
9
  Non-working capital loans
2
 
                               210
 
                               210
 
2
 
0-6
Consumer 1-4 family loans:
                 
  Closed end first mortgage loans
1
 
                                 76
 
                                 76
 
1
 
198
Total
4
 
 $                         1,610
 
 $                         1,610
 
4
 
0-198
                   

 
 
For the three month period ending September 30, 2017, the commercial and industrial troubled debt restructurings described above decreased the allowance for loan losses by $77,000 and the consumer troubled debt restructuring described above did not impact the allowance. No charge-offs were recorded on the troubled debt restructurings described above for the three-month period ending September 30, 2017.

During the nine months ended September 30, 2017, certain loans were modified as troubled debt restructurings and are reflected in the table presented below. The modified terms of these loans include one or a combination of the following: inadequate compensation for the terms of the restructure or renewal; a modification of the repayment terms which delays principal repayment for some period; or renewal terms offered to borrowers in financial distress where no additional credit enhancements were obtained at the time of renewal. These concessions are included in the table below.

Additional concessions were granted to borrowers with previously identified troubled debt restructured loans during the nine months ended September 30, 2017.  Three of the loans are for commercial real estate properties where the collateral value and/or cash flows from the companies occupying the buildings do not support the loans with recorded investments of $821,000.  The other four loans are commercial and industrial non-working capital loans with recorded investments of $1.7 million. These troubled debt restructured loans with additional concessions increased the allowance by $80,000 and resulted in no charge-offs for the nine-month period ending September 30, 2017. These concessions are not included in the table below.

The following table presents loans by class modified as new troubled debt restructurings that occurred during the nine months ended September 30, 2017:


     
Modified Repayment Terms
     
Pre-Modification
 
Post-Modification
     
Extension
     
Outstanding
 
Outstanding
     
Period or
 
Number of
 
Recorded
 
Recorded
 
Number of
 
Range
(dollars in thousands)
Loans
 
Investment
 
Investment
 
Loans
 
(in months)
Troubled Debt Restructurings
                 
Commercial and industrial loans:
                 
  Working capital lines of credit loans
1
 
 $1,324
 
 $1,324
 
1
 
9
  Non-working capital loans
4
 
 1,922
 
 1,922
 
4
 
0-6
Commercial real estate and multi-
                 
  family residential loans:
                 
  Owner occupied loans
1
 
 486
 
 486
 
1
 
6
Consumer 1-4 family loans:
                 
  Closed end first mortgage loans
2
 
 120
 
 122
 
2
 
198-350
Total
8
 
 $3,852
 
 $3,854
 
8
 
0-350

23

For the nine-month period ended September 30, 2017, the commercial and industrial troubled debt restructurings described above increased the allowance for loan losses by $583,000, the commercial real estate and multi-family residential loan troubled debt restructuring described above increased the allowance for loan losses by $36,000, and the consumer troubled debt restructurings described above had no impact on the allowance.  No charge-offs resulted from any troubled debt restructurings described above during the nine-month period ended September 30, 2017.

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The Company analyzes commercial loans individually by classifying the loans as to credit risk. This analysis is performed on a quarterly basis for Special Mention, Substandard and Doubtful grade loans and annually on Pass grade loans over $250,000.

The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as Special Mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

Substandard. Loans classified as Substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard, with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

24

Loans not meeting the criteria above that are analyzed individually as part of the above-described process are considered to be Pass rated loans with the exception of consumer troubled debt restructurings which are evaluated and listed with Substandard commercial grade loans and consumer nonaccrual loans which are evaluated individually and listed with Not Rated loans. Loans listed as Not Rated are consumer loans or commercial loans with consumer characteristics included in groups of homogenous loans which are analyzed for credit quality indicators utilizing delinquency status. As of September 30, 2018, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:


     
Special
         
Not
   
(dollars in thousands)
Pass
 
Mention
 
Substandard
 
Doubtful
 
Rated
 
Total
  Commercial and industrial loans:
                     
    Working capital lines of credit loans
 $673,013
 
 $56,578
 
 $27,165
 
 $0
 
 $359
 
 $757,115
    Non-working capital loans
642,700
 
22,853
 
22,376
 
0
 
5,302
 
693,231
  Commercial real estate and multi-
                     
    family residential loans:
                     
    Construction and land development loans
229,848
 
371
 
303
 
0
 
0
 
230,522
    Owner occupied loans
527,154
 
22,374
 
22,108
 
0
 
0
 
571,636
    Nonowner occupied loans
517,558
 
1,865
 
654
 
0
 
0
 
520,077
    Multifamily loans
191,620
 
223
 
0
 
0
 
0
 
191,843
  Agri-business and agricultural loans:
                   
    Loans secured by farmland
150,769
 
6,684
 
1,809
 
0
 
0
 
159,262
    Loans for agricultural production
125,769
 
7,288
 
1,800
 
0
 
0
 
134,857
  Other commercial loans
114,207
 
0
 
0
 
0
 
4
 
114,211
  Consumer 1-4 family mortgage loans:
                   
    Closed end first mortgage loans
58,166
 
0
 
1,949
 
0
 
124,740
 
184,855
    Open end and junior lien loans
8,730
 
0
 
243
 
0
 
178,480
 
187,453
    Residential construction loans
0
 
0
 
0
 
0
 
15,100
 
15,100
  Other consumer loans
12,211
 
0
 
46
 
0
 
70,706
 
82,963
Total
 $3,251,745
 
 $118,236
 
 $78,453
 
 $0
 
 $394,691
 
 $3,843,125


As of December 31, 2017, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

     
Special
         
Not
   
(dollars in thousands)
Pass
 
Mention